Broken Procurement Theory

I recently read about ‘Broken Windows Theory’ from a 1982 Atlantic article by George L. Kelling and James Q. Wilson. It is a criminological theory that suggests small but visible signs of public disarray, such as broken windows, abandoned vehicles, litter, and disorderly behavior, create an environment that encourages more serious crime and a systemic breakdown in orderly conduct. Kelling and Wilson note:

“This is as true in nice neighborhoods as in rundown ones. Window-breaking does not necessarily occur on a large scale because some areas are inhabited by determined window-breakers whereas others are populated by window-lovers; rather, one unrepaired broken window is a signal that no one cares, and so breaking more windows costs nothing.”

This means that no matter how affluent or destitute the neighborhood, no matter who inhabits it, a non-compliant action will inevitably inspire further non-compliance.

Procurement Governance

In procurement, we see a similar breakdown. Processes erode and disappear as a result of the behaviors of those who are meant to carry them out. From end users, to buyers, to leaders of the organization, everyone has the potential to defy convention and inspire similar actions in others. Regardless of the size of the company or industry they operate within, non-compliant behavior by an individual or a business unit normalizes such behavior and drives others to mimic it. Processes must be governed by policy and policy must be driven and enforced by leadership - both departmental and organizational.

The authors continue:

“…‘untended’ behavior also leads to the breakdown of community controls. A stable neighborhood of families who care for their homes, mind each other's children, and confidently frown on unwanted intruders can change, in a few years or even a few months, to an inhospitable and frightening jungle. A piece of property is abandoned, weeds grow up, a window is smashed. Adults stop scolding rowdy children; the children, emboldened, become more rowdy. Families move out, unattached adults move in. Teenagers gather in front of the corner store. The merchant asks them to move; they refuse. Fights occur. Litter accumulates. People start drinking in front of the grocery; in time, an inebriate slumps to the sidewalk and is allowed to sleep it off. Pedestrians are approached by panhandlers.”

A poor or non-existent procurement policy sends a message. It announces to everyone across the organization that controls are not in place. Without the right governance, procurement becomes an unarmed police force and loses its ability to protect itself and the business as a whole.

While establishing themselves, most organizations focus their efforts on generating revenue and investing in the business. While certain governance structures come into effect in those early days, procurement’s are rarely among them. Although procurement is central to revenue generation, its governance structures are typically an after-thought. In these instances, the buying process becomes a free-for-all. The business might use P-cards for purchases where it doesn’t make sense simply because they can. The spend associated with non-PO purchases might balloon to a figure significantly higher than PO purchases. Those are just two examples. Not every organization will descend into chaos, but it’s always advisable to establish regulations for holding the business accountable. If there were no standards in place telling people not to lie, cheat, and steal how much more prevalent would this behavior be?

I cannot say that there is a definitive right way to introduce a governance structure for procurement. There are countless ways to go about it. As with any other big decision, it’s important to consider your options carefully and select the path that is best for your organization and its culture. I can say with absolute certainty, however, that not having a governance structure of any sort leaves procurement and the organization vulnerable to a number of risk factors.

A Small Change Can Go a Long Way

Broken Window Theory also lends itself to another interesting procurement transformation concept: small changes can lead to big results. Transformation in and of itself is a scary idea to many organizations. It’s especially frightening to those who know how broken their procurement function is. Change of any kind is always going to be intimidating. It requires consistent effort and persistence. Who has time for this when they’re are trying to run a business?!

As I’ve already mentioned, one small act of non-compliance can (and often does) lead to many more. In that same vein, one small act of compliance can inspire a course correction. Several acts of compliance can lead to a slow but steady change of pace within the organization. Transformation does not have to be a massive, all-at-once, overhaul. Small, steady bites of change structured in a digestible way could prove most effective for a change-averse organization. No matter what course or timeline you select, it is all about taking that first step into unknown waters. Only then will you know how deep in you are.

A Holistic View of Procurement

The Atlantic article closes with this thought:

“Our crime statistics and victimization surveys measure individual losses, but they do not measure communal losses. Just as physicians now recognize the importance of fostering health rather than simply treating illness, so the police—and the rest of us—ought to recognize the importance of maintaining, intact, communities without broken windows.”

The same idea goes for procurement. When reporting metrics on the performance of procurement’s people, processes, and technology many organizations focus on the individual numbers. Which ONE process or person is creating a breakdown, and can we address it? It is not that simple. The value of procurement is best understood when viewed holistically. Each element ties to the next like a row of dominoes; if one piece falters the rest will inevitably come crashing down.

Creating an environment that embraces procurement is a challenge. Utilizing some of these concepts - governance, incremental changes, and a holistic perspective - can help to create a plan that will alter your organization’s mindset, inspire enterprise-wide change, and distinguish procurement as a leader, not a follower.